How to trade Oracle now that it reported earnings (updated)

By Cody Willard

*Updated 12/17/10 11:25am EST: Yup, number bumps across the street as Oracle’s commentary about very strong demand in every single one of their regions on this planet, along with higher margins, has the analyst community singing praises. Meanwhile, your “tell” looks pretty good for the near term, as the stock has remained range-bound within a 1% trading range all day. The action into the close becomes your tell now and, feet to fire, I’d expect this stock to inch up another couple or so percent before the close…but we’ll see. More important, the stock’s cheaper now than it was heading into the report — despite the 5% pop today, you see, because forward consensus estimates are likely to end up higher this time next month than the stock has popped today.

*Updated 12/16/10 6:15pm EST: Hearing rumblings of several upgrades and analyst number bumps (shocking, I know) after tonight’s earnings report and subsequent conference call. Oracle’s commentary was full of confidence and even excitement. Tomorrow morning will see Oracle trading higher, but watch how it trades throughout the day for some tell of what the next few weeks will hold from there. A strong rally, steady, high volume rally to multi-year highs will be hailed as a break out by the technicians. We shall see.

Oracle’s up another 3% after hours tonight, to highs not seen since the days of the great tech bubble. Indeed, back in October 2000 was the last time Oracle traded with a $155 billion market cap which it will likely open up with tomorrow. In case you’re wondering, Oracle’s all time was back also in 2000, when the stock peaked at about $45 per share giving it nearly a $250 billion market cap.

I figure with the new hardware/software/server paradigm that Oracle is driving — all by itself courtesy of having now integrated all those high-priced acquisitions like Seibel and the low-priced acquisitions like Sun Micro. It’s all Oracle’s future in the data center, and they’re another one of the major beneficiaries of the App Revolution that I’ve been highlighting. Oracle supplies the steel to the shovel makers to the app gold rush, if you will.

Here’s what I wrote about Oracle in my report “50 Stocks for the App Revolution”, some of which I think will rise 1000% in the next few years:

The story here is Oracle’s new software/hardware combination of offerings, Exalogic and Exadata, which help corporations, media companies, banks and just about every other thing that will run apps work. And Exalogic and Exadata are catching huge traction, as the incredible leap in efficiency in running any kind of data-crunching intensive information makes these puppies pay themselves within months.

Oracle’s long-been out strategizing its major competitors and the open source world by locking-in customers with proprietary offerings and creating de facto standard platforms with its software, but the brilliance of buying Sun Micro on the cheap with its huge net cash balance was pretty awesome. I just wish they’d stop wasting shareholder value by buying billions of dollars of their own shares and would up the dividend to a 3% plus yield.

Not as cheap as it could be right now, at 12x forward earnings, but in ten years I think it’s a pretty good bet that Oracle will be higher than it is today.

Revolution Investing rating: 7/10

It’s no longer 12x forward earnings, as the stock is running up faster than estimates are rising, but I would still much rather be a buyer of Oracle here than anything else. I’m not sure about the next few weeks, but given a year or longer time frame, I think Oracle’s darn near a must own.

To get my Revolution Investing analysis and rating for Oracle, Apple, Google, Arm Holdings, Level 3, Verizon, Microsoft, Intel and 43 other app stocks some of which you’ve probably never heard of including which ones I think can go up 1000%, you can simply order the report today by visiting http://AppRevolutionStocks.com and I’ll personally email you the report or get it as an eBook for your Kindle or iPhone at http://www.smashwords.com/books/view/31192.

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About The Cody Word

Cody Willard writes the Revolution Investing investment newsletter for MarketWatch and posts the trades from his personal account at TradingWithCody.com He is the founder of WallStreetAll-Stars.com and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and is on the University of New Mexico Alumni Board. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. Cody, a former hedge fund manager, and his stock picks and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.